Contents Contents...........................................................................................................................................2 INTRODUCTION...........................................................................................................................1 MAIN BODY..................................................................................................................................1 Detailed evaluation and analysis of the proposal that the company has chosen to do its expansion so that it can prove useful and beneficial for the company and the economy too......1 Preparation of operating budget for the year 2021 for 12 months that are closely related with the activities and objectives of the firm.......................................................................................2 Examination of the budget which acts as a tool of planning, control, as well as decision making in the business.................................................................................................................3 CONCLUSION................................................................................................................................4 REFERENCES................................................................................................................................6
INTRODUCTION Budgeting is one of the most important as well as crucial aspect for each and every firm that is operating in the market irrespective of the industry in which it is operating as it helps in setting standards so that actual performance can be compared with it in an appropriate manner which will add to the value of the firm in the long run(Alleyne, Armstrong and Chandler, 2018). Sarah’s house is a firm that is run by a British family and is operational in the UK and mainly deals in hospitality and other related services of it like accommodation, food service, banquets and events, etc. The firm is performing commendable well in the competitive market conditions that are prevailing in there and thus has captured a larger share of customer base because of it. In this report there is a brief discussion about the expansion of the existing business that it wants to do that in student accommodation as it is high in demand due to increase in foreign students in the universities that are working in the UK. Apart from that this report also includes preparation of operating budget and its detailed analysis and evaluation so that the expansion can prove beneficial for the firm in the industry in which it is operating. MAIN BODY Detailed evaluation and analysis of the proposal that the company has chosen to do its expansion so that it can prove useful and beneficial for the company and the economy too As it can be seen from the above that Sarah’s house is a company that is doing well in terms of growth and sales as it have acquired major proportion in the market of the UK’s hospitality sector. It employs more than 800 employees and works in 12 different regions of the country and is considered as one of the most prestigious firm in the UK. Since the firm is planning to do expansion in student accommodation sector too as there is a huge demand of that in the industry because of increase in the universities and enrolment of more number of foreign students in that universities(Yator, 2018). Since it is doing well in the market and does not require much marketing for it expansion as it already enjoys a loyal customer base and is geographically located at a place which is called the centre of the city. It is also performing well in its sales as well as profit terms as it has maintained a considerable amount of profit in all the past years which can act as a base while expanding its business as it can invest a huge amount in which will subsequently increase the
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growth of the company as it is operating in a highly competitive business environment (Dewantoro, Hidayat and Sulasmiyati, 2017). As student accommodation is in huge demand in the UK and if the company that is Sarah’s house expands it in an efficient and effective manner it will help it to grow as well as prosper in the long term. It will also prove beneficial from the economy’s point of view as it will help the universities to enrol more and more number of talented individuals that are able and willing to study there and thus simultaneously increasing the per capita income and gross domestic product of the country which is very important for every nation. Also in the current scenario quality education is regarded as one of the most powerful tool that has the potential to change the world and if the organisation expands in a sector that is accommodation of students it will give scope to millions of students to live and acquire quality education that will help them to grow as a professional as well as a person in the long run(Messer, 2020). Preparation of operating budget for the year 2021 for 12 months that are closely related with the activities and objectives of the firm Budget is an integral part of each and every business as it helps in analysing and evaluating the performance of the company after comparing the set standards with the actual facts and figures of the company so that necessary as well as appropriate measures can be taken for rectifications. There are different types of budgets and different companies use it according to the needs and requirements of the firm so that it can add to the value of the firm in the market in which it operates and also gives an upper hand to the business so as to sustain in the industry for a much longer period of time as compared to its competitors(Hijal-Moghrabi, 2017). The company Sarah’s house is one of the most impactful firm in the market because it gives high quality products and services to its customers so as to stand ahead of its rivals that are operatinginthesimilarmarketconditions.Asitisplanningtoexpandinstudent’s accommodation sector so as to capture a wide area which will result in its growth and development in the future by increasing its sales and profitability in the long run. As the cost is rising for Sarah’s house so it is the best option in front of the firm that is to expand in the above mentioned sector so that it will provide sustainability to the organisation to operate in the market that is highly dynamic in nature. Since the firm is in expanding process it is very important as well as essential to prepare a budget that is operating in nature so that a detailed analysis can be done for the revenues and the
expenses of the company thus providing valuable information regarding the working of the business. It will also prove useful as well as beneficial in allocating the funds effective and efficiently so that all the available resources can be fully utilised and that too without any wastage(Hodgson, Pengilly and Jovevski, 2020). Though there will be expenses at starting while expansion of firm in student accommodation sector but it will fetch greater profits in the near future as it will carter the needs of many students that are willing to study in the UK. Below is an operating budget prepared with the context of the firm that is Sarah’s house- Particul arsJanFebMarchAprilMayJuneJulyAugustSeptOctNovDecTotal Revenue s generate d (a)100000015000002590000312000099000090000011200001180000105000012500001500000145000016200000 Variable cost- Meal30000060660011000001000000300000200000300000400000400000500000500000400000 5606600 Free wifi226000312400500000700000300000300000200000200000200000200000300000300000 3438400 Medical1300006840014600012200078000986009200060500810007400091200129400 1041700 Room service144000300000489000589000247000238900225000247000200000267000379000381000 3325900 Total variable cost800000132500022850002411000925000837500817000907500881000104100012702001210400 13500200 Contrib ution200000175000305000709000 - 826000-7475003030002725001690002090000229800239600 2879800 Fixed cost- Rent100001000010000100001000010000100001000010000100001000010000110000
Fitness Equipm ent200002000020000200002000020000200002000020000200002000020000 220000 Car hire deprecia tion200002000020000200002000020000200002000020000200002000020000 220000 Total fixed cost500005000050000500005000050000500005000050000500005000050000 550000 Profit150000125000255000659000 - 876000-797500253000222500119000159000179800189600 448800 Profit margin15%8.33%9.85%21.12% - 88.48 %-88.61%22.59%18.86%11.33%12.72%11.99%13.08% -0.453 Examination of the budget which acts as a tool of planning, control, as well as decision making in the business Budgeting is one of the most crucial as well as important tool as it helps the organisation to achieve its goals and objectives that are set at the starting of the business(Kengatharan, 2016). Different types of budgets helps in different ways but the main objective and aim of each one of them is to help in decision, planning, and control which are an integral part of each and every business that is operating in the industry. There are various ways by which it helps in taking appropriate decisions by formulating plans well in advance so that necessary controlling measures can be taken well within times so that it can add to the market value of the firm in the long run aspect. Sarah’s house also makes various types of budgets that help it in improving the position of the firm in the industry and all the impacts and importance is described below in detail- Planning-It is the foremost function as different plans are formulated on the basis of the requirements of the business so that it can lead the company towards its goals and objectives and that too well within a limited period of time. It bridges the gap between present that is the current standing of the business and the future that is the expectations
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of the organisation. Sarah’s house evaluates its plans in a systematic as well as precise manner so that it can strike the exact point on which the firm wants it to strike which will further helps the firm to grow and prosper at the same time in the hospitality industry. Decision making-Budgets helps in decision making and that too in an effective and efficient manner so that it can help the organisation to do well in the current situation by reducing the time taken in taking decisions(Manafe and Setyorini, 2019). Apart from it also helps in improving and increasing the performance of the individuals that are working in the organisation by taking appropriate decisions that are within the reach of everyone. The firm that is Sarah’s house deploys a team of experts in this regard so that they can take exact decisions that are important for the firm’s growth and development so as to add value to the activities of the company which will subsequently affect its performance in a positive way. Controlling-Budgets helps in controlling the wastage of resources by comparing standards with performance so that it can lead to effectiveness of the functions that are performed by the organisation in the industry. Sarah’s house keeps a strict vigil on every activity that is performed in the firm so that it can take necessary measures to control various aspects that are critical from the firm’s point of view(Mauro, Cinquini and Grossi, 2017). From the above it can be concluded that Sarah’s house is performing quite satisfactory in the market as its profit remained good, though there are difference in revenues and expenses that results in change in profit but still it is positioned in a much better place as compared to its competitors. In May and June months the profit of the firm was not good but in April and March it was highest due to enrolment of new students as new sessions begins in that period only. While in Jan, Feb, Oct, and Nov the profit was satisfactory as compared to the profits of Sept, but in July, Aug, and Dec profits of the organisation was good enough to sustain in the market for a longer period of time(Mentari and Daryanto, 2018). CONCLUSION Budgets are an integral part of every system and for business it is highly important as it initiates many aspects that are essential for it. From the above it can be concluded that the firm Sarah’s house that is operating in the UK is placed at a good place in the market and is expanding in a sector of student accommodation that is in huge demand in the country due to the
quality of education that it imparts. Also it can be concluded from the above that it is performing considerably well except some of the months in which the demand is not as expected but in other months it recovered quickly earning a huge amount profits that are an essential part of the business. Further it can be concluded that budgeting helps in various other aspects too like decision making, planning, as well as controlling which helps the organisation to grow and prosper in the competitive market conditions that are prevailing in the current scenario
REFERENCES Books and journals Alleyne, P., Armstrong, S. and Chandler, M., 2018. A survey of capital budgeting practices used by firms in Barbados.Journal of Financial Reporting and Accounting. Dewantoro, R. A., Hidayat, R. R. and Sulasmiyati, S., 2017. Analisis Penggunaan Capital BudgetingDalamMembuatKeputusanInvestasiAktivaTetap(StudiPadaPTZena Pariwisata Nusantara).Jurnal Administrasi Bisnis.47(2). pp.19-24. Hijal-Moghrabi, I., 2017. The current practice of performance-based budgeting in the largest US cities: An innovation theory perspective.Public Performance & Management Review.40(4). pp.652-675. Hodgson, H., Pengilly, B. and Jovevski, D., 2020. Make super great Again, phone insurance & zero based budgeting. Kengatharan, L., 2016. Capital budgeting theory and practice: a review and agenda for future research.Applied Economics and Finance.3(2). pp.15-38. Manafe, J. D. and Setyorini, T., 2019. The impact of organizational commitment as mediator and moderator relationship between budgeting participation on managerial performance.The International Journal of Social Sciences World (TIJOSSW).1(01). pp.11-20. Mauro, S. G., Cinquini, L. and Grossi, G., 2017. Insights into performance-based budgeting in the public sector: a literature review and a research agenda.Public Management Review. 19(7). pp.911-931. Mentari, D. and Daryanto, W. M., 2018. Capital Budgeting Model and Sensitivity Analysis of the Project Feasibility in Vietnam for the Period of 2019-2037.International Journal of Business, Economics and Law.17(2). pp.21-28. Messer, R., 2020. Capital Budgeting Decisions. InFinancial Modeling for Decision Making: Using MS-Excel in Accounting and Finance. Emerald Publishing Limited. Yator, B. C., 2018.The Effect of Capital Budgeting Techniques on the Financial Performance of Companies Listed at the Nairobi Securities Exchange(Doctoral dissertation, university of nairobi).